Of Special Interest


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2nd September 2011

New shape of HSH Nordbank

HSH Nordbank reported a net attributable profit of €337m (£298m $487m ¥37.3bn Y3,105m) for the first half compared with a year ago LOSS of €400m. The turnaround was achieved despite a 19% fall in income. The most significant factor was the reduced loan loss provisions with other help arising from lower costs to the government for guarantees and sightly reduced expenses.

The bank has not yet reached a final agreement with the European Commission with regard to remedies for the state aid received. However based upon 'breakthrough discussions' with the EC and the board's own objectives the bank recently outlined the shape its expects the bank will take in the future. There can be no surprise that one aspect of the new shape is to reduce staff numbers by 900. Other key changes outlined are:

- The total assets of the Core Bank will be limited to €82bn by the end 2014.

- The total assets of the Restructuring Unit, which contains all portfolios and activities no longer forming part of the Bank’s core business, will be wound down to €38bn by the end of 2014.

- Asset-based aviation finance is to be given up.

- Real estate finance outside Germany is to be discontinued.

- Shipping business unit to be reduced to around €15bn by the end of 2014 (in the continuing core bank).

- The Bank will be closing its branches in Amsterdam, Paris and Shanghai, in addition to the previously announced closures.

- To spin off further non-strategic equity holdings.

"The undertakings required by the EU Commission will have a huge impact on our business and represent a major entrepreneurial challenge. The required size of the Bank is a good quarter smaller than originally planned in 2009. This means that the Bank's earnings basis will shrink to a correspondingly drastic degree. At the same time we had to promise the EU Commission that we would not grow significantly in the Bank's core areas of business in the foreseeable future. In other words, under the new underlying conditions our cost base is much too high, with the result that cost cuts and thus also job cuts are inevitable," explained Paul Lerbinger, chairman of the management board (CEO).

The bank followed this announcement with news that it had sold its stake in 47 private equity buyout funds to a syndicate consisting of AXA Private Equity and LGT Capital Partners. No financial details of the transaction were released.

Income statement first half 2011 2010 Change
€m €m %
Net interest income 635 802 -21
Net commission income 61 94 -35
Result from hedging -10 3 --
Net trading income 1 -36 --
Net income from financial investments 164 114 44
Accounted for under the equity method -56 - -
Total income 795 977 -19
Loan loss provisions 271 -649 --
Administrative expenses -382 -402 -5
Other operating result 13 -36 --
Net income before restructuring 697 -110 --
Result from restructuring 2 -14 --
Expenses for government guarantees -211 -303 -30
Net income before taxes 488 -427 --
Income tax expense -150 -47 --
Group net income/loss 338 -380 --
Attributable to non-controlling interests 1 20 -95
Attributable to HSH Nordbank shareholders 337 -400 --